NASDAQ:TOI Oncology Institute Q1 2025 Earnings Report $2.92 -0.28 (-8.59%) As of 02:58 PM Eastern This is a fair market value price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast Oncology Institute EPS ResultsActual EPS-$0.18Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/AOncology Institute Revenue ResultsActual Revenue$104.41 millionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/AOncology Institute Announcement DetailsQuarterQ1 2025Date5/14/2025TimeAfter Market ClosesConference Call DateWednesday, May 14, 2025Conference Call Time5:00PM ETUpcoming EarningsOncology Institute's Q2 2025 earnings is scheduled for Tuesday, August 12, 2025, with a conference call scheduled on Friday, August 8, 2025 at 12:30 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Oncology Institute Q1 2025 Earnings Call TranscriptProvided by QuartrMay 14, 2025 ShareLink copied to clipboard.PresentationSkip to Participants Operator00:00:00Good afternoon, and welcome to the Oncology Institute's First Quarter twenty twenty five Earnings Conference Call. Today's call is being recorded, and we have allocated one hour for prepared remarks and Q and A. At this time, I'd like to turn the conference over to Mark Heplheiser, General Counsel at TOI. Thank you. You may begin. Mark HueppelsheuserGeneral Counsel at The Oncology Institute00:00:23The press release announcing the Oncology Institute's results for the first quarter of twenty twenty five are available at the Investors section of the company's website, theoncologyinstitute.com. A replay of this call will also be available at the company's website after the conclusion of this call. Before we get started, I would like to remind you of the company's Safe Harbor language included within the company's press release for the first quarter twenty twenty five. Management may make forward looking statements, including guidance and underlying assumptions. Forward looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. Mark HueppelsheuserGeneral Counsel at The Oncology Institute00:01:00For a further discussion of risks related to our business, see our filings with the SEC. This call will also discuss non GAAP financial measures, such as adjusted EBITDA and free cash flow. Reconciliation of these non GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC and available on our website. Joining me on the call today is our CEO, Dan Vernick and our CFO, Rob Carter. Following our prepared remarks, we'll open the call for your questions. With that, I'll turn the call over to Dan. Daniel VirnichChief Executive Officer at The Oncology Institute00:01:35Thank you, Mark. Good afternoon, everyone, and thank you for joining our first quarter twenty twenty five earnings call. Today, we will discuss first quarter twenty twenty five results with a focus on our strong start to the year and momentum on our path to profitability and positive cash flow by the end of twenty twenty five. I'd like to start with some key updates on Q1 performance. I'm happy to report that revenue for Q1 increased by 10% versus the prior year period. Daniel VirnichChief Executive Officer at The Oncology Institute00:02:05This was driven by a few important factors. Our Retail Pharmacy and Dispensary business continues to grow rapidly and set still records, contributing $49,300,000 in revenue and over $9,000,000 in gross profit in Q1 alone. This business segment grew over 20% in the first quarter of twenty twenty five versus prior year. As noted on our year end call in March, we had a very strong start to the year with new capitated contract wins, adding over 80,000 lives in the first quarter on four agreements across the Florida, California and Nevada markets. Anticipated new capitation contracts in the first half of twenty twenty five are projected to add approximately $50,000,000 in new revenue on an annualized basis. Daniel VirnichChief Executive Officer at The Oncology Institute00:02:55We started our first fully delegated capitation agreement with a major health plan in Florida on March 1, where we are delegated for utilization management, claims, and network. This is going to be our preferred model for health plan relationships going forward, as it gives us differential ability to manage therapeutics with our MSO practice partners, as well as engage with them on future high value opportunities for TOI through our retail pharmacy and clinical trials program. We also signed a new capitation contract in Nevada during the first quarter, which adds over 80,000 Medicaid lives to Clark County with an effective date of July 1. Our fee for service business also returned to growth in the quarter, growing 9% quarter over quarter and 2% year over year, highlighting the impact of our investments in referral relationship management and call center expansion. Achieving profitability and our near term path to positive free cash flow generation in Q4 remain the management team's north star. Daniel VirnichChief Executive Officer at The Oncology Institute00:03:55Some highlights from Q1 related to this effort include adjusted EBITDA loss of $5,100,000 which is on the upper end of our guidance for the quarter gross profit of $17,200,000 which represents growth of 44.1% year over year continued acceleration of near term capitation opportunities in the pipeline, with line of sight to an additional 100,000 lives with anticipated effective dates in Q2 and Q3 focus on growing our radiation oncology and radiopharmaceutical segments, which will be accretive to fee for service margins successful outsourcing of our clinical trials program to Helios Clinical Trials. Helios will operate as a site management organization, and we believe their expertise will dramatically accelerate trials growth in existing and new markets in the second half of the year. However, the structure of the transaction will involve deconsolidating clinical research revenue from QI's income statement, which will modestly impact our full year revenue, which Rob will discuss in more detail shortly. As it stands today, we are not currently projecting a negative impact to drug costs in 2025 related to recently announced tariffs, although we are carefully assessing country of origin for all therapeutics in our portfolio, ensuring we have optionality for all disease classes to protect our margins. Daniel VirnichChief Executive Officer at The Oncology Institute00:05:17Finally, we successfully executed a partial paydown of our convertible preferred debt of $20,000,000 in Q1 with permanent elimination of our minimum cash covenant, followed by capital raise that added $16,000,000 back to our balance sheet. Combined, these transactions strengthen TY's financial position and provide us with greater flexibility to execute on our strategic priorities. Finally, this afternoon, we announced that Doctor. Jeff Langsam is joining the TOI team as Chief Clinical Officer. Jeff joined us from Cigna, where he led national efforts in oncology and specialty pharmacy lending to his role at TOI, where he will lead our efforts around therapeutics, utilization management, and MSO practice engagement. Daniel VirnichChief Executive Officer at The Oncology Institute00:06:02The Chief Clinical Officer role was conceived as part of TOI's evolution in light of the increasingly complex drug and delegation landscape in which TOI operates, allowing us to further distance our capabilities and delivered value. To this end, Doctor. Langsam's role is designed as a net addition to TOI's central clinical infrastructure and is expected to remain collaborative, but ultimately distinct from that of TOI's Chief Medical Officer, Doctor. Yael Podniss, who will continue to serve as the chief clinician overseeing our provider staff. Last week, we also announced that TOI will be presenting clinical trial data at the American Society of Clinical Oncology, ASCO, annual meeting later this month, which demonstrates the value and effectiveness of TOI's clinical model at reducing cost of care while driving improvements in Part A utilization for the patients that we serve. Daniel VirnichChief Executive Officer at The Oncology Institute00:06:56With that, I will turn the call over to Rob to provide additional details on our Q1 performance and 2025 outlook. Rob CarterChief Financial Officer at The Oncology Institute00:07:05Thanks, Dan, and good afternoon, everyone. Let's begin by reviewing our financial performance for the quarter. Consolidated revenue for Q1 twenty twenty five was $104,400,000 an increase of 10.3% compared to Q1 twenty twenty four. The increase in revenue was driven primarily by a 24.2% growth in TOI's dispensary segment due to continued growth in the attachment of prescriptions to our patient visits. Notably, we saw our fee for service business returned to growth during the first quarter, increasing 2.3% to $35,600,000 in 2025 versus the prior year period. Rob CarterChief Financial Officer at The Oncology Institute00:07:49We are encouraged by the positive patient and referral feedback on TOI services and our strong track record for high quality care combined with our value oriented model gives us confidence in our continued fee for service growth driven by patient choice and health system and community providers patient referrals. Gross profit in Q1 of twenty twenty five was $17,200,000 an increase of 44.1% compared to Q1 of twenty twenty four. This increase is attributed to improvement in revenue and margin in both capitation and fee for service within patient services, as well as improvement in both revenue and margin in TOI's dispensary segment. Margin improvement in the first quarter for both patient services and dispensary businesses is attributable to the recognition of a one time rebate recognized over the fourth quarter of twenty twenty four and first quarter of twenty twenty five related to the renewal of a three year contract with TOI's primary drug supplier. This is not expected to recur in future quarters, although we do expect the benefit of drug price increases to improve over the course of 2025. Rob CarterChief Financial Officer at The Oncology Institute00:09:00SG and A including depreciation and amortization was 27,200,000 in Q1 of twenty twenty five, a 9% decline compared to Q1 of twenty twenty four. As a percentage of revenue, SG and A including depreciation and amortization was 26% in the quarter, decreasing five sixty basis points from Q1 of twenty twenty four. Loss from operations was $9,900,000 an improvement from an $18,000,000 loss in Q1 of twenty twenty four. Net loss was $19,600,000 in the quarter, an improvement of $303,000 compared to Q1 of twenty twenty four. Adjusted EBITDA was negative $5,100,000 compared to negative $10,900,000 in Q1 of twenty twenty four. Rob CarterChief Financial Officer at The Oncology Institute00:09:46Free cash flow was negative $3,900,000 compared to negative $15,400,000 in Q1 of twenty twenty four. Moving to the balance sheet. As of the end of Q1 twenty twenty five, our cash and cash equivalents balance was $39,800,000 This represents an increase of $3,700,000 of cash and cash equivalents compared to Q1 of twenty twenty four. This is attributable to our capital raise completed in the first quarter as well as efforts to maximize efficiencies in working capital, particularly in accounts receivable and inventory management. Also, were able to reduce our principal balance on our senior secured convertible note through our debt pay down and debt to equity exchange agreement, reducing our quarterly cash interest payments by approximately $1,000,000 annually. Rob CarterChief Financial Officer at The Oncology Institute00:10:35As Dan mentioned, in the first quarter, we successfully closed a private placement that resulted in gross proceeds of approximately 16,500,000.0 and further contributes to our prioritization of organic growth and building working capital and liquidity to fund TOI's ongoing growth. In conjunction with this transaction, a major shareholder entered into an exchange agreement whereby approximately $4,100,000 of aggregate principal amount of senior secured convertible notes were exchanged for common equivalent preferred stock and warrants for common stock. Turning to guidance, following our strong first quarter results, we remain confident in our trajectory for the remainder of the year and are reaffirming our fiscal year twenty twenty five guidance. As Dan mentioned earlier, we are outsourcing our clinical trials business to Healios Clinical Trials. Under the terms of the new arrangement, TOI will recognize revenue solely for our share of the profit, which will reduce our expected revenue for the year by $5,000,000 However, we are not revising our full year guidance as we anticipate the increased revenue from the dispensary segment will offset this impact. Rob CarterChief Financial Officer at The Oncology Institute00:11:45Therefore, we continue to expect revenue in the range of $460,000,000 to $480,000,000 adjusted EBITDA in the range of negative $8,000,000 to negative $17,000,000 and free cash flow of negative $12,000,000 to negative $21,000,000 for the year. Additionally, we remain on track to deliver positive adjusted EBITDA in the fourth quarter. We will also be providing select guidance for the second quarter of twenty twenty five. In Q2, we expect adjusted EBITDA loss will be in the range of negative 4,000,000 to negative $5,000,000 We expect the positive margin contribution of our fully delegated Florida contract combined with increased encounter volume in radiation oncology and continued growth in our dispensary segment will support the quarter to quarter improvements in adjusted EBITDA. All in all, we believe our execution to date with accelerating growth and improving profitability sets us up well to achieve our full year targets. Rob CarterChief Financial Officer at The Oncology Institute00:12:41Before I wrap up, I'd like to briefly address two political headlines that have been topical recently. On the topic of tariffs and any possible impact on TOI, as it currently stands, we have not observed any impact related to tariffs or drug price inflation and our pricing catalogs are fixed through the second quarter with our suppliers. We do not currently anticipate any trends in drug prices that will create risks to our guidance or business performance, but we are continuing to closely monitor the situation and we are actively evaluating country of origin for TOI supply chain. Importantly, due to TOI significant experience actively managing drug formulary as a core capability of our value based care model. We do believe our clinical team has the ability to mitigate any potential impact from tariffs on individual drugs or manufacturers were to materialize. Rob CarterChief Financial Officer at The Oncology Institute00:13:37On the topic of executive orders related to pharmaceutical pricing practices, while it's too early to draw any concrete conclusions on the ultimate outcome of drug regulation, we believe there are several factors that make TOI less susceptible to drug pricing impact. The size and scale of our capitated business where drug costs are inversely correlated with profits. The ability of to to control formulary in our clinics and influence formulary in our delegated network to manage from pricing risk within clinical guidelines and the multiple variables that contribute to fee for service and pharmacy drug margins, which constitute the spread between costs and reimbursement rather than the absolute cost of the drugs themselves. This spread relationship may or may not be impacted by any drug pricing reform. With that, I'll turn it back to Dan for closing comments. Daniel VirnichChief Executive Officer at The Oncology Institute00:14:27Thanks, Rob. Looking to the remainder of the year, we will continue to build on our momentum through strong operational management, increased efficiencies and strategic market expansion. As we discussed today, we are executing against a near term path to sustained cash flow positivity and profitability in the second half of twenty twenty five, setting up well to deliver profitable growth in 2026. Our organic fee for service growth, pharmacy attachment and existing value based contract pipeline give me confidence in our strong trajectory, supporting our progress against our strategic priorities. We appreciate the continued support of our shareholders and the great work from our team as we execute against our plans to drive long term shareholder value. Daniel VirnichChief Executive Officer at The Oncology Institute00:15:13With that, we're now ready to take your questions. Operator? Operator00:15:19Thank you. We will now be conducting a question and answer star one on your telephone keypad. A confirmation tone will indicate that you are in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up a handset before pressing the star keys. Operator00:15:47And our first question comes from David Larson with BTIG. Please proceed with your question. David LarsenManaging Director at BTIG00:15:54Hey, congratulations on a good start to the year. Can you talk a little bit about the gross profit growth of 44% year over year? What was the main driver of that? In my mind, that's obviously a very important metric considering like I think for 2024 gross profit actually maybe declined by 9% year over year. So thanks very much. Driver of gross profit would be great. Rob CarterChief Financial Officer at The Oncology Institute00:16:22Yeah David, hey this is Rob. Thanks for the question. So a couple of things contributing to this. First off the bat is the one time rebate that we mentioned that was attributable to a new contract signed with our primary distributor. The second piece is that as you know, our drug pricing changes quarterly. Rob CarterChief Financial Officer at The Oncology Institute00:16:42January is a big quarter for drug price changes. It was relatively favorable from what we've seen in previous years. So that combined with some nice volume increases particularly on the dispensary side contributed to the pickup in overall margin. David LarsenManaging Director at BTIG00:16:59How much was the rebate for please? Rob CarterChief Financial Officer at The Oncology Institute00:17:02About 1,500,000.0 David LarsenManaging Director at BTIG00:17:061 point 5 million dollars Okay. It looks like your gross profit on a year over year basis was up more than $5,000,000 So there was still a very good growth beyond that. Okay. And then can you talk a little bit about your fee for service revenue please, your patient service revenue? Like the cap revenue, was that down 1% year over year and fee for service was up 2% year over year? David LarsenManaging Director at BTIG00:17:35I guess I would have thought there would have been more growth than that. And do I see 81 clinics compared to 87 clinics in the year ago period? Was there a change there? Just any thoughts around the patient service revenue growth? It looked a little bit light to me on a year over year basis. Rob CarterChief Financial Officer at The Oncology Institute00:17:54Yes, I'll start on the cap side. So as we've called out, the pipeline is robust, numerous launches. The most meaningful and impactful launched in March, that's the fully delegated contract in Florida. The impact of that will be seen to a much greater degree later in the year. Also a couple other launches here in the next upcoming months that will also contribute significantly. Daniel VirnichChief Executive Officer at The Oncology Institute00:18:23And hi, David, it's Daniel VirnichChief Executive Officer at The Oncology Institute00:18:24Dan Burnick. I can comment on the sites going from 87 to 81. Compared to this quarter a year ago, we closed a couple low volume locations that were unprofitable for TOI. And you're seeing that reflected in the change from 87 to 81. However, I will call out that we've added over 30 additional sites of care in the Florida market. Daniel VirnichChief Executive Officer at The Oncology Institute00:18:45So, as we move to this hybrid employed and model in our delegated contract, our total available types of care actually went up. David LarsenManaging Director at BTIG00:18:52Right. I'll take earnings growth over revenue growth all day long. So, okay, great. And then can you talk a little bit about your SG and A management? It looks like SG and A costs declined 11% year over year and by like around 600 basis points of revenue, which is obviously great. David LarsenManaging Director at BTIG00:19:17Just what are your thoughts in terms of like total SG and A savings expectations for 2025? Daniel VirnichChief Executive Officer at The Oncology Institute00:19:23Yes, we remain committed to keeping SG and A roughly flat for 2025, which I think is important to note given our overall projections on growth for the organization. We've been very disciplined at our approach related to vendor and labor management and continue to seek ways to operate our business more efficiently. We have a number of initiatives going on in the technology side as well, where we are going to be looking to engage AgenTek AI into some key workflow processes over the next twelve to eighteen months, which we believe will drive even greater efficiencies and manage down our SG and A as a percent of revenue. David LarsenManaging Director at BTIG00:19:57Okay. And then in 2024, there was a pretty significant impact from DIR fees. I did not hear you mention those on this call. Are we now past DIR fees or is that still a potential headwind this year? Rob CarterChief Financial Officer at The Oncology Institute00:20:13No, we are past DIR fees. DIR fees as they used to exist no longer do. It's all priced as a point of sale. The impact that we saw last year was overall reimbursement pressure as that change went into effect. And so that's behind us and things are looking significantly better relative to last year. David LarsenManaging Director at BTIG00:20:39So that was a $15,000,000 drag on revenue and EBITDA last year and you have completely sort of lapped that. Is that correct? Rob CarterChief Financial Officer at The Oncology Institute00:20:48That's right. That's right. What we consider as dispensary margins going forward are steady state. David LarsenManaging Director at BTIG00:20:57Okay, good. And then there was one large payer contract that I think was maybe 11% of revenue that kind of disappeared in 2024. I think you've kind of fully lapped that. And what I'm also hearing from you is you're actually entering into, I think you highlighted four new arrangements this quarter, and we should see patient service revenue ramp as we progress through the year because of these new contracts. Is that correct? Daniel VirnichChief Executive Officer at The Oncology Institute00:21:29That's correct. Yes. That was in reference to the new capitated contract signed as part of our value based arrangements. But all those are tied to fee for service revenue that flows through our dispensary. And then we are seeing additional growth in just fee for service patient services revenue. David LarsenManaging Director at BTIG00:21:46Can you provide a little color around why that contract ended and just like the purpose of that question is, are there any other contracts in 2025 that might be at risk? How is your relationship with some of the largest plans that you're working with? Daniel VirnichChief Executive Officer at The Oncology Institute00:22:02Yeah, that was a contract that was an old contract where we had kind of a mutually agreeable termination related to a number of just disputes. So, we overall have a very stable contract portfolio. We've got incredibly low historical contract turn rate and do a lot to manage our client relationships and show the value that we provide. So, I don't anticipate any likely terminations as we progress through 2025. David LarsenManaging Director at BTIG00:22:29Okay. And then do you have any thoughts on IV margins? I think that was a little bit of a headwind early last year. Just any thoughts there? Rob CarterChief Financial Officer at The Oncology Institute00:22:37Yes. Similar to dispensary, what we've seen so far based on new year pricing is favorable to what we were expecting, certainly favorable to 2024. The general progression that we see throughout the year is improvement in overall margins. And so things are going slightly better than planned there. David LarsenManaging Director at BTIG00:23:00Okay. That's great. And then you mentioned tariffs and this executive order and then there's also the most favored nation clause or executive order that may or may not get through. So if drug prices, let's say go up by 25% across the board, is that good or is that bad for the Oncology Institute? Because higher drug prices would eventually result in more revenue and probably more margin for you in your fee for service book. Is that correct? Rob CarterChief Financial Officer at The Oncology Institute00:23:38Yeah, yeah, that's accurate. David LarsenManaging Director at BTIG00:23:42And in dispensing. And it's mainly Medicare Part B as in boy, not Medicare Part D. Is that correct? Rob CarterChief Financial Officer at The Oncology Institute00:23:51Sorry, mainly in terms of what? David LarsenManaging Director at BTIG00:23:53In terms of reimbursement for fee for service revenue and also Rob CarterChief Financial Officer at The Oncology Institute00:23:57Yes, that's correct. I mean hypothetically it would impact B and D. David LarsenManaging Director at BTIG00:24:03Okay. David LarsenManaging Director at BTIG00:24:05Okay. It looks like a pretty good quarter. Congrats on good start to the year. And thanks for taking my questions. I'll hop back in the queue. Rob CarterChief Financial Officer at The Oncology Institute00:24:15Thanks so much, David. We appreciate it. Operator00:24:20Thank you. And our next question comes from Yuan Zi with B. Riley Securities. Please proceed with your question. Yuan ZhiManaging Director at B.Riley Securities00:24:28Thank you for taking our questions. Dan, maybe we can start with the recent report by UnitedHealth. It was reported that the seniors within their Medicare Advantage plan used health care services twice as much as last year. I want to check if you noticed a similar trend within oncology practice, or is it related to some other diseases or surgery practice? Daniel VirnichChief Executive Officer at The Oncology Institute00:24:54Yeah, I can't speak to what other drivers might be associated with that. What I can say is that we track that on a very close basis for the oncology care needs of the populations we serve. And, you know, we haven't seen a jump to the magnitude that United mentioned. I don't know if that's driven by other drugs outside of oncology or other utilization trends, have been more unfavorable than expected. Yuan ZhiManaging Director at B.Riley Securities00:25:18Yep, maybe a follow-up question here. So they also reported the enrolled patients are sicker. I guess my question is two parts. First, did you notice similar trends there? And two, when you negotiate a value based contract with the payer, is it based on historical data from insurance companies or is it based on your own database and external service to reflect the latest patient profile? Daniel VirnichChief Executive Officer at The Oncology Institute00:25:48Yeah, so for the first part of the question, we haven't noticed a change in prevalence or average stage of cancer patients we're treating. So, that would correlate to a sicker population that hasn't pivoted that we've noticed. In terms of pricing, we do that based off of historical utilization up through the most recent period before we make a contract go effective. So, we have a pretty recent trend on utilization. And then we factor in a cost trend related to historical drug price changes as well in our forward looking utilization. Daniel VirnichChief Executive Officer at The Oncology Institute00:26:23So, that's pretty real time as far as how contributing to the pricing of our contracts. Yuan ZhiManaging Director at B.Riley Securities00:26:30Yep. Got it. So on your new territory part, is there any metrics you can share on the progress to fill up the capacities in your Florida clinic, whether it is the lives under management in terms of overall capacity or patient encounter? Daniel VirnichChief Executive Officer at The Oncology Institute00:26:50I'm so sorry, Yuan, could you please repeat the first part of the question? Yuan ZhiManaging Director at B.Riley Securities00:26:53Yeah, is there any metrics you can share on the progress to fill up capacities in your Florida clinic? Daniel VirnichChief Executive Officer at The Oncology Institute00:27:02Yeah, absolutely. So we track, we project encounters by market and by down to the detail by clinic across our portfolio as we forecast each year. And we are tracking our right to plan in terms of capacity fill in both our legacy markets and then the newer markets like Florida. There is some additional upside we believe in the back half of this year related to some contract wins, which are in the pipeline, but not in the forecast. So, all is going to plan as far as slowing capacity. Yuan ZhiManaging Director at B.Riley Securities00:27:32Yep. Got it. And maybe one last question from me. Just to clarify, do you aim to have a cash flow positivity and profitability in the second half of twenty twenty five versus 4Q twenty twenty five from your last earnings call? And was there any change there? Rob CarterChief Financial Officer at The Oncology Institute00:27:52No change to guide. We expect full cash flow and adjusted EBITDA positivity in Q4 of twenty twenty five. Yuan ZhiManaging Director at B.Riley Securities00:28:00Got it. Thank you. Rob CarterChief Financial Officer at The Oncology Institute00:28:02Thanks, Juan. Operator00:28:06Thank you. Our next question comes from the line of Bill Sutherland with The Benchmark Company. Please proceed with your question. Bill SutherlandDirector of Research at The Benchmark Company LLC00:28:23Thanks, operator. Hey, guys. Thanks for taking the questions. Most of mine have been asked. But going back to a couple of the key business metrics, the slight decline in the lives under value based contracts, is that related to that contract you were talking about that went away last year? Daniel VirnichChief Executive Officer at The Oncology Institute00:28:48Yeah, exactly. As measured by lives, that is a decrease. But I would just keep in mind that there's a product mix in every contract, and that specific contract had a heavy predominance of Medi Cal and commercial lives, which are high numbers but low PMPM reimbursement typically versus our newer markets where we're signing MA only contracts which are lower lives but higher reimbursement. Bill SutherlandDirector of Research at The Benchmark Company LLC00:29:12Got it. Any important renewals coming up as far as contracts? Daniel VirnichChief Executive Officer at The Oncology Institute00:29:21Nothing significant to mention, no. Most of our relationships are multi year, many of them date back over ten years. They typically auto renew and then, yeah, there's no significant renewals in the near future Bill SutherlandDirector of Research at The Benchmark Company LLC00:29:36then the guidance for the year, is there any pipeline conversion that you need to execute to do the numbers or is it basically all set up at this point? Rob CarterChief Financial Officer at The Oncology Institute00:29:49Yeah, we don't need any additional value based contracts that are in the pipeline to achieve guidance. So any additional wins that are in the pipeline would be upside to what we've guided to. Bill SutherlandDirector of Research at The Benchmark Company LLC00:30:01Okay. And finally, it's an interesting trend and I'm not sure if it's not really part of your model, but I keep hearing from health systems about trying to do more of the cancer cases in the home with everything else. How does that trend kind of segue with your business, if at all? Thanks. Daniel VirnichChief Executive Officer at The Oncology Institute00:30:27Yeah, I mean, think it would be a very positive trend for if more cancer care was delivered in the home. We work pretty closely with our pair partners and trying to find innovative ways to deliver therapeutics in the home. I'd say it's much easier on the specialty medication side than it is with infusible. But that being said, there's no reason why we can't achieve that as a future state. So again, that gets back to our mission to deliver higher level care in the community and something we would definitely want to be a part of. Bill SutherlandDirector of Research at The Benchmark Company LLC00:30:59Got it. Okay. Nice quarter. Thanks very much. Operator00:31:05Thanks, And our next question comes from Robert LeBoyer with Noble Capital Markets. Please proceed with your question. Robert LeboyerSenior Biotechnology Analyst at Noble Capital Markets00:31:18Thank you. Congratulations on a nice quarter. Question has to do with the number of lives under contract and covered by the managed care policies. The previous number was 1,900,000. It looks like 're adding a $100,000 in the first and second quarter and then another $80,000 in Nevada after July 1. Robert LeboyerSenior Biotechnology Analyst at Noble Capital Markets00:31:48So is that just simply additive to the 1.9 or is there some more nuanced way to project the number of lives that are covered? Rob CarterChief Financial Officer at The Oncology Institute00:32:05No, it's additive. That's the right way of thinking about it. The nuance in terms of modeling the financial impact would be where those lives are located. And so as we've talked about before in some of our material, there is a higher PMPM for contracts in Nevada and Florida than there is in California due to the overall cost of care. So that would be the one nuance to consider. Robert LeboyerSenior Biotechnology Analyst at Noble Capital Markets00:32:30Okay, great. And in terms of seasonality or any kind of other trends that you see throughout the year, you noticed anything in the first quarter versus other quarters throughout the year at this point? Rob CarterChief Financial Officer at The Oncology Institute00:32:49Yes. So our first quarter is always seasonally the lowest in terms of encounter volume. And so that's part of the whole picture when you're looking at the full year guide. We knew that it would be the lowest quarter in terms of revenue, the worst quarter in terms of adjusted EBITDA loss. And so we expect to see progressive improvement quarter over quarter, both due to seasonality as well as the addition of new contracts and lives and encounter growth. Robert LeboyerSenior Biotechnology Analyst at Noble Capital Markets00:33:18Okay, good. And just one last question. In terms of the top three plans and clients that you have, what would be the percentage of each of the top three in terms of revenues? Rob CarterChief Financial Officer at The Oncology Institute00:33:37As a percent of cap revenue, it's probably about 20%, if you're looking at the top three contracts. Robert LeboyerSenior Biotechnology Analyst at Noble Capital Markets00:33:45Okay, great. All right, thank you very much. Rob CarterChief Financial Officer at The Oncology Institute00:33:49Thank you. Daniel VirnichChief Executive Officer at The Oncology Institute00:33:49Thank you, Robert. Operator00:33:53Thank you. And as a reminder, this is your final chance to ask a question. If you would like to, please press star one on your telephone keypad. Okay. There are no further questions at this time. And with that, this does concludeRead moreParticipantsExecutivesMark HueppelsheuserGeneral CounselDaniel VirnichChief Executive OfficerRob CarterChief Financial OfficerAnalystsDavid LarsenManaging Director at BTIGYuan ZhiManaging Director at B.Riley SecuritiesBill SutherlandDirector of Research at The Benchmark Company LLCRobert LeboyerSenior Biotechnology Analyst at Noble Capital MarketsPowered by Key Takeaways On Q1 2025 revenue of $104.4 million grew 10.3% year-over-year, led by a 20% jump in Retail Pharmacy/Dispensary revenue ($49.3 million) and 80,000 new lives added under capitation yielding $50 million of annualized revenue; fee-for-service also returned to growth, up 2%. Adjusted EBITDA loss narrowed to –$5.1 million (at the upper end of guidance) and gross profit rose 44.1% to $17.2 million thanks to a one-time rebate, while free cash flow loss improved to –$3.9 million, positioning the company to achieve positive EBITDA and free cash flow by Q4 2025. The first fully delegated capitation agreement in Florida launched March 1, complemented by a new Nevada Medicaid deal effective July 1, and a pipeline of 100,000 additional lives set to go live in Q2/Q3, solidifying the company’s preferred model for margin control and network management. Oncology Institute outsourced its clinical trials program to Helios Clinical Trials as a site management organization, which will accelerate growth in H2 2025 but deconsolidate approximately $5 million of trial revenue, with dispensary segment growth expected to offset this impact. Balance sheet strengthened via a $20 million convertible-debt paydown, elimination of the minimum cash covenant, and a $16 million capital raise, ending Q1 with $39.8 million cash; FY 2025 guidance of $460–480 million revenue, adjusted EBITDA –$8 million to –$17 million, and free cash flow –$12 million to –$21 million was reaffirmed. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallOncology Institute Q1 202500:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipants Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Oncology Institute Earnings HeadlinesThe Oncology Institute set to join the Russell 2000® and Russell 3000® IndexesJune 3 at 8:00 AM | globenewswire.comOncology Institute First Quarter 2025 Earnings: US$0.25 loss per share (vs US$0.22 loss in 1Q 2024)May 16, 2025 | finance.yahoo.comBanks aren’t ready for this altcoin—are you?I've never been more confident about a DeFi opportunity. This isn't about complex trading or risky bets. This is about being in the right place at the right time – and I believe that time is now.June 5, 2025 | Crypto 101 Media (Ad)Oncology Institute Shares Rise After Higher 1Q RevenueMay 15, 2025 | marketwatch.comThe Oncology Institute Reports First Quarter 2025 Financial Results and Reaffirms Full Year 2025 GuidanceMay 15, 2025 | finanznachrichten.deTOI reaffirms 2025 guidance with $460M–$480M revenue target as capitation contracts fuel growthMay 15, 2025 | msn.comSee More Oncology Institute Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Oncology Institute? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Oncology Institute and other key companies, straight to your email. Email Address About Oncology InstituteOncology Institute (NASDAQ:TOI), an oncology company, provides various medical oncology services in the United States. The company operates through three segments: Dispensary, Patient Services, and Clinical Trials & Other. It offers physician services, in-house infusion and dispensary, clinical trial, radiation, outpatient blood product transfusion, and patient support services, as well as educational seminars, support groups, and counseling services. The company also provides managing clinical trials, palliative care programs, stem cell transplants services, and other care delivery models associated with non-community-based academic and tertiary care settings; and conducts clinical trials for a range of pharmaceutical and medical device companies. It serves adult and senior cancer patients. The company has a strategic collaboration with Healthly Forge to offer cancer care services to patients in Southern California. The Oncology Institute, Inc. was founded in 2007 and is headquartered in Cerritos, California.View Oncology Institute ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Red Robin's Comeback: Q1 Earnings Spark Investor HopesOllie’s Q1 Earnings: The Good, the Bad, and What’s NextBroadcom Earnings Preview: AVGO Stock Near Record HighsUlta’s Beautiful Q1 Earnings Report Points to More Gains Aheade.l.f. Beauty Sees Record Surge After Earnings, Rhode DealCrowdStrike Stock Slips: Analyst Downgrades Before Earnings Bullish NVIDIA Market Set to Surge 50% Ahead of Q1 Earnings Upcoming Earnings Oracle (6/11/2025)Adobe (6/12/2025)Accenture (6/20/2025)FedEx (6/24/2025)Micron Technology (6/25/2025)Paychex (6/25/2025)NIKE (6/26/2025)PepsiCo (7/10/2025)Bank of America (7/14/2025)JPMorgan Chase & Co. (7/14/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
PresentationSkip to Participants Operator00:00:00Good afternoon, and welcome to the Oncology Institute's First Quarter twenty twenty five Earnings Conference Call. Today's call is being recorded, and we have allocated one hour for prepared remarks and Q and A. At this time, I'd like to turn the conference over to Mark Heplheiser, General Counsel at TOI. Thank you. You may begin. Mark HueppelsheuserGeneral Counsel at The Oncology Institute00:00:23The press release announcing the Oncology Institute's results for the first quarter of twenty twenty five are available at the Investors section of the company's website, theoncologyinstitute.com. A replay of this call will also be available at the company's website after the conclusion of this call. Before we get started, I would like to remind you of the company's Safe Harbor language included within the company's press release for the first quarter twenty twenty five. Management may make forward looking statements, including guidance and underlying assumptions. Forward looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. Mark HueppelsheuserGeneral Counsel at The Oncology Institute00:01:00For a further discussion of risks related to our business, see our filings with the SEC. This call will also discuss non GAAP financial measures, such as adjusted EBITDA and free cash flow. Reconciliation of these non GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC and available on our website. Joining me on the call today is our CEO, Dan Vernick and our CFO, Rob Carter. Following our prepared remarks, we'll open the call for your questions. With that, I'll turn the call over to Dan. Daniel VirnichChief Executive Officer at The Oncology Institute00:01:35Thank you, Mark. Good afternoon, everyone, and thank you for joining our first quarter twenty twenty five earnings call. Today, we will discuss first quarter twenty twenty five results with a focus on our strong start to the year and momentum on our path to profitability and positive cash flow by the end of twenty twenty five. I'd like to start with some key updates on Q1 performance. I'm happy to report that revenue for Q1 increased by 10% versus the prior year period. Daniel VirnichChief Executive Officer at The Oncology Institute00:02:05This was driven by a few important factors. Our Retail Pharmacy and Dispensary business continues to grow rapidly and set still records, contributing $49,300,000 in revenue and over $9,000,000 in gross profit in Q1 alone. This business segment grew over 20% in the first quarter of twenty twenty five versus prior year. As noted on our year end call in March, we had a very strong start to the year with new capitated contract wins, adding over 80,000 lives in the first quarter on four agreements across the Florida, California and Nevada markets. Anticipated new capitation contracts in the first half of twenty twenty five are projected to add approximately $50,000,000 in new revenue on an annualized basis. Daniel VirnichChief Executive Officer at The Oncology Institute00:02:55We started our first fully delegated capitation agreement with a major health plan in Florida on March 1, where we are delegated for utilization management, claims, and network. This is going to be our preferred model for health plan relationships going forward, as it gives us differential ability to manage therapeutics with our MSO practice partners, as well as engage with them on future high value opportunities for TOI through our retail pharmacy and clinical trials program. We also signed a new capitation contract in Nevada during the first quarter, which adds over 80,000 Medicaid lives to Clark County with an effective date of July 1. Our fee for service business also returned to growth in the quarter, growing 9% quarter over quarter and 2% year over year, highlighting the impact of our investments in referral relationship management and call center expansion. Achieving profitability and our near term path to positive free cash flow generation in Q4 remain the management team's north star. Daniel VirnichChief Executive Officer at The Oncology Institute00:03:55Some highlights from Q1 related to this effort include adjusted EBITDA loss of $5,100,000 which is on the upper end of our guidance for the quarter gross profit of $17,200,000 which represents growth of 44.1% year over year continued acceleration of near term capitation opportunities in the pipeline, with line of sight to an additional 100,000 lives with anticipated effective dates in Q2 and Q3 focus on growing our radiation oncology and radiopharmaceutical segments, which will be accretive to fee for service margins successful outsourcing of our clinical trials program to Helios Clinical Trials. Helios will operate as a site management organization, and we believe their expertise will dramatically accelerate trials growth in existing and new markets in the second half of the year. However, the structure of the transaction will involve deconsolidating clinical research revenue from QI's income statement, which will modestly impact our full year revenue, which Rob will discuss in more detail shortly. As it stands today, we are not currently projecting a negative impact to drug costs in 2025 related to recently announced tariffs, although we are carefully assessing country of origin for all therapeutics in our portfolio, ensuring we have optionality for all disease classes to protect our margins. Daniel VirnichChief Executive Officer at The Oncology Institute00:05:17Finally, we successfully executed a partial paydown of our convertible preferred debt of $20,000,000 in Q1 with permanent elimination of our minimum cash covenant, followed by capital raise that added $16,000,000 back to our balance sheet. Combined, these transactions strengthen TY's financial position and provide us with greater flexibility to execute on our strategic priorities. Finally, this afternoon, we announced that Doctor. Jeff Langsam is joining the TOI team as Chief Clinical Officer. Jeff joined us from Cigna, where he led national efforts in oncology and specialty pharmacy lending to his role at TOI, where he will lead our efforts around therapeutics, utilization management, and MSO practice engagement. Daniel VirnichChief Executive Officer at The Oncology Institute00:06:02The Chief Clinical Officer role was conceived as part of TOI's evolution in light of the increasingly complex drug and delegation landscape in which TOI operates, allowing us to further distance our capabilities and delivered value. To this end, Doctor. Langsam's role is designed as a net addition to TOI's central clinical infrastructure and is expected to remain collaborative, but ultimately distinct from that of TOI's Chief Medical Officer, Doctor. Yael Podniss, who will continue to serve as the chief clinician overseeing our provider staff. Last week, we also announced that TOI will be presenting clinical trial data at the American Society of Clinical Oncology, ASCO, annual meeting later this month, which demonstrates the value and effectiveness of TOI's clinical model at reducing cost of care while driving improvements in Part A utilization for the patients that we serve. Daniel VirnichChief Executive Officer at The Oncology Institute00:06:56With that, I will turn the call over to Rob to provide additional details on our Q1 performance and 2025 outlook. Rob CarterChief Financial Officer at The Oncology Institute00:07:05Thanks, Dan, and good afternoon, everyone. Let's begin by reviewing our financial performance for the quarter. Consolidated revenue for Q1 twenty twenty five was $104,400,000 an increase of 10.3% compared to Q1 twenty twenty four. The increase in revenue was driven primarily by a 24.2% growth in TOI's dispensary segment due to continued growth in the attachment of prescriptions to our patient visits. Notably, we saw our fee for service business returned to growth during the first quarter, increasing 2.3% to $35,600,000 in 2025 versus the prior year period. Rob CarterChief Financial Officer at The Oncology Institute00:07:49We are encouraged by the positive patient and referral feedback on TOI services and our strong track record for high quality care combined with our value oriented model gives us confidence in our continued fee for service growth driven by patient choice and health system and community providers patient referrals. Gross profit in Q1 of twenty twenty five was $17,200,000 an increase of 44.1% compared to Q1 of twenty twenty four. This increase is attributed to improvement in revenue and margin in both capitation and fee for service within patient services, as well as improvement in both revenue and margin in TOI's dispensary segment. Margin improvement in the first quarter for both patient services and dispensary businesses is attributable to the recognition of a one time rebate recognized over the fourth quarter of twenty twenty four and first quarter of twenty twenty five related to the renewal of a three year contract with TOI's primary drug supplier. This is not expected to recur in future quarters, although we do expect the benefit of drug price increases to improve over the course of 2025. Rob CarterChief Financial Officer at The Oncology Institute00:09:00SG and A including depreciation and amortization was 27,200,000 in Q1 of twenty twenty five, a 9% decline compared to Q1 of twenty twenty four. As a percentage of revenue, SG and A including depreciation and amortization was 26% in the quarter, decreasing five sixty basis points from Q1 of twenty twenty four. Loss from operations was $9,900,000 an improvement from an $18,000,000 loss in Q1 of twenty twenty four. Net loss was $19,600,000 in the quarter, an improvement of $303,000 compared to Q1 of twenty twenty four. Adjusted EBITDA was negative $5,100,000 compared to negative $10,900,000 in Q1 of twenty twenty four. Rob CarterChief Financial Officer at The Oncology Institute00:09:46Free cash flow was negative $3,900,000 compared to negative $15,400,000 in Q1 of twenty twenty four. Moving to the balance sheet. As of the end of Q1 twenty twenty five, our cash and cash equivalents balance was $39,800,000 This represents an increase of $3,700,000 of cash and cash equivalents compared to Q1 of twenty twenty four. This is attributable to our capital raise completed in the first quarter as well as efforts to maximize efficiencies in working capital, particularly in accounts receivable and inventory management. Also, were able to reduce our principal balance on our senior secured convertible note through our debt pay down and debt to equity exchange agreement, reducing our quarterly cash interest payments by approximately $1,000,000 annually. Rob CarterChief Financial Officer at The Oncology Institute00:10:35As Dan mentioned, in the first quarter, we successfully closed a private placement that resulted in gross proceeds of approximately 16,500,000.0 and further contributes to our prioritization of organic growth and building working capital and liquidity to fund TOI's ongoing growth. In conjunction with this transaction, a major shareholder entered into an exchange agreement whereby approximately $4,100,000 of aggregate principal amount of senior secured convertible notes were exchanged for common equivalent preferred stock and warrants for common stock. Turning to guidance, following our strong first quarter results, we remain confident in our trajectory for the remainder of the year and are reaffirming our fiscal year twenty twenty five guidance. As Dan mentioned earlier, we are outsourcing our clinical trials business to Healios Clinical Trials. Under the terms of the new arrangement, TOI will recognize revenue solely for our share of the profit, which will reduce our expected revenue for the year by $5,000,000 However, we are not revising our full year guidance as we anticipate the increased revenue from the dispensary segment will offset this impact. Rob CarterChief Financial Officer at The Oncology Institute00:11:45Therefore, we continue to expect revenue in the range of $460,000,000 to $480,000,000 adjusted EBITDA in the range of negative $8,000,000 to negative $17,000,000 and free cash flow of negative $12,000,000 to negative $21,000,000 for the year. Additionally, we remain on track to deliver positive adjusted EBITDA in the fourth quarter. We will also be providing select guidance for the second quarter of twenty twenty five. In Q2, we expect adjusted EBITDA loss will be in the range of negative 4,000,000 to negative $5,000,000 We expect the positive margin contribution of our fully delegated Florida contract combined with increased encounter volume in radiation oncology and continued growth in our dispensary segment will support the quarter to quarter improvements in adjusted EBITDA. All in all, we believe our execution to date with accelerating growth and improving profitability sets us up well to achieve our full year targets. Rob CarterChief Financial Officer at The Oncology Institute00:12:41Before I wrap up, I'd like to briefly address two political headlines that have been topical recently. On the topic of tariffs and any possible impact on TOI, as it currently stands, we have not observed any impact related to tariffs or drug price inflation and our pricing catalogs are fixed through the second quarter with our suppliers. We do not currently anticipate any trends in drug prices that will create risks to our guidance or business performance, but we are continuing to closely monitor the situation and we are actively evaluating country of origin for TOI supply chain. Importantly, due to TOI significant experience actively managing drug formulary as a core capability of our value based care model. We do believe our clinical team has the ability to mitigate any potential impact from tariffs on individual drugs or manufacturers were to materialize. Rob CarterChief Financial Officer at The Oncology Institute00:13:37On the topic of executive orders related to pharmaceutical pricing practices, while it's too early to draw any concrete conclusions on the ultimate outcome of drug regulation, we believe there are several factors that make TOI less susceptible to drug pricing impact. The size and scale of our capitated business where drug costs are inversely correlated with profits. The ability of to to control formulary in our clinics and influence formulary in our delegated network to manage from pricing risk within clinical guidelines and the multiple variables that contribute to fee for service and pharmacy drug margins, which constitute the spread between costs and reimbursement rather than the absolute cost of the drugs themselves. This spread relationship may or may not be impacted by any drug pricing reform. With that, I'll turn it back to Dan for closing comments. Daniel VirnichChief Executive Officer at The Oncology Institute00:14:27Thanks, Rob. Looking to the remainder of the year, we will continue to build on our momentum through strong operational management, increased efficiencies and strategic market expansion. As we discussed today, we are executing against a near term path to sustained cash flow positivity and profitability in the second half of twenty twenty five, setting up well to deliver profitable growth in 2026. Our organic fee for service growth, pharmacy attachment and existing value based contract pipeline give me confidence in our strong trajectory, supporting our progress against our strategic priorities. We appreciate the continued support of our shareholders and the great work from our team as we execute against our plans to drive long term shareholder value. Daniel VirnichChief Executive Officer at The Oncology Institute00:15:13With that, we're now ready to take your questions. Operator? Operator00:15:19Thank you. We will now be conducting a question and answer star one on your telephone keypad. A confirmation tone will indicate that you are in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up a handset before pressing the star keys. Operator00:15:47And our first question comes from David Larson with BTIG. Please proceed with your question. David LarsenManaging Director at BTIG00:15:54Hey, congratulations on a good start to the year. Can you talk a little bit about the gross profit growth of 44% year over year? What was the main driver of that? In my mind, that's obviously a very important metric considering like I think for 2024 gross profit actually maybe declined by 9% year over year. So thanks very much. Driver of gross profit would be great. Rob CarterChief Financial Officer at The Oncology Institute00:16:22Yeah David, hey this is Rob. Thanks for the question. So a couple of things contributing to this. First off the bat is the one time rebate that we mentioned that was attributable to a new contract signed with our primary distributor. The second piece is that as you know, our drug pricing changes quarterly. Rob CarterChief Financial Officer at The Oncology Institute00:16:42January is a big quarter for drug price changes. It was relatively favorable from what we've seen in previous years. So that combined with some nice volume increases particularly on the dispensary side contributed to the pickup in overall margin. David LarsenManaging Director at BTIG00:16:59How much was the rebate for please? Rob CarterChief Financial Officer at The Oncology Institute00:17:02About 1,500,000.0 David LarsenManaging Director at BTIG00:17:061 point 5 million dollars Okay. It looks like your gross profit on a year over year basis was up more than $5,000,000 So there was still a very good growth beyond that. Okay. And then can you talk a little bit about your fee for service revenue please, your patient service revenue? Like the cap revenue, was that down 1% year over year and fee for service was up 2% year over year? David LarsenManaging Director at BTIG00:17:35I guess I would have thought there would have been more growth than that. And do I see 81 clinics compared to 87 clinics in the year ago period? Was there a change there? Just any thoughts around the patient service revenue growth? It looked a little bit light to me on a year over year basis. Rob CarterChief Financial Officer at The Oncology Institute00:17:54Yes, I'll start on the cap side. So as we've called out, the pipeline is robust, numerous launches. The most meaningful and impactful launched in March, that's the fully delegated contract in Florida. The impact of that will be seen to a much greater degree later in the year. Also a couple other launches here in the next upcoming months that will also contribute significantly. Daniel VirnichChief Executive Officer at The Oncology Institute00:18:23And hi, David, it's Daniel VirnichChief Executive Officer at The Oncology Institute00:18:24Dan Burnick. I can comment on the sites going from 87 to 81. Compared to this quarter a year ago, we closed a couple low volume locations that were unprofitable for TOI. And you're seeing that reflected in the change from 87 to 81. However, I will call out that we've added over 30 additional sites of care in the Florida market. Daniel VirnichChief Executive Officer at The Oncology Institute00:18:45So, as we move to this hybrid employed and model in our delegated contract, our total available types of care actually went up. David LarsenManaging Director at BTIG00:18:52Right. I'll take earnings growth over revenue growth all day long. So, okay, great. And then can you talk a little bit about your SG and A management? It looks like SG and A costs declined 11% year over year and by like around 600 basis points of revenue, which is obviously great. David LarsenManaging Director at BTIG00:19:17Just what are your thoughts in terms of like total SG and A savings expectations for 2025? Daniel VirnichChief Executive Officer at The Oncology Institute00:19:23Yes, we remain committed to keeping SG and A roughly flat for 2025, which I think is important to note given our overall projections on growth for the organization. We've been very disciplined at our approach related to vendor and labor management and continue to seek ways to operate our business more efficiently. We have a number of initiatives going on in the technology side as well, where we are going to be looking to engage AgenTek AI into some key workflow processes over the next twelve to eighteen months, which we believe will drive even greater efficiencies and manage down our SG and A as a percent of revenue. David LarsenManaging Director at BTIG00:19:57Okay. And then in 2024, there was a pretty significant impact from DIR fees. I did not hear you mention those on this call. Are we now past DIR fees or is that still a potential headwind this year? Rob CarterChief Financial Officer at The Oncology Institute00:20:13No, we are past DIR fees. DIR fees as they used to exist no longer do. It's all priced as a point of sale. The impact that we saw last year was overall reimbursement pressure as that change went into effect. And so that's behind us and things are looking significantly better relative to last year. David LarsenManaging Director at BTIG00:20:39So that was a $15,000,000 drag on revenue and EBITDA last year and you have completely sort of lapped that. Is that correct? Rob CarterChief Financial Officer at The Oncology Institute00:20:48That's right. That's right. What we consider as dispensary margins going forward are steady state. David LarsenManaging Director at BTIG00:20:57Okay, good. And then there was one large payer contract that I think was maybe 11% of revenue that kind of disappeared in 2024. I think you've kind of fully lapped that. And what I'm also hearing from you is you're actually entering into, I think you highlighted four new arrangements this quarter, and we should see patient service revenue ramp as we progress through the year because of these new contracts. Is that correct? Daniel VirnichChief Executive Officer at The Oncology Institute00:21:29That's correct. Yes. That was in reference to the new capitated contract signed as part of our value based arrangements. But all those are tied to fee for service revenue that flows through our dispensary. And then we are seeing additional growth in just fee for service patient services revenue. David LarsenManaging Director at BTIG00:21:46Can you provide a little color around why that contract ended and just like the purpose of that question is, are there any other contracts in 2025 that might be at risk? How is your relationship with some of the largest plans that you're working with? Daniel VirnichChief Executive Officer at The Oncology Institute00:22:02Yeah, that was a contract that was an old contract where we had kind of a mutually agreeable termination related to a number of just disputes. So, we overall have a very stable contract portfolio. We've got incredibly low historical contract turn rate and do a lot to manage our client relationships and show the value that we provide. So, I don't anticipate any likely terminations as we progress through 2025. David LarsenManaging Director at BTIG00:22:29Okay. And then do you have any thoughts on IV margins? I think that was a little bit of a headwind early last year. Just any thoughts there? Rob CarterChief Financial Officer at The Oncology Institute00:22:37Yes. Similar to dispensary, what we've seen so far based on new year pricing is favorable to what we were expecting, certainly favorable to 2024. The general progression that we see throughout the year is improvement in overall margins. And so things are going slightly better than planned there. David LarsenManaging Director at BTIG00:23:00Okay. That's great. And then you mentioned tariffs and this executive order and then there's also the most favored nation clause or executive order that may or may not get through. So if drug prices, let's say go up by 25% across the board, is that good or is that bad for the Oncology Institute? Because higher drug prices would eventually result in more revenue and probably more margin for you in your fee for service book. Is that correct? Rob CarterChief Financial Officer at The Oncology Institute00:23:38Yeah, yeah, that's accurate. David LarsenManaging Director at BTIG00:23:42And in dispensing. And it's mainly Medicare Part B as in boy, not Medicare Part D. Is that correct? Rob CarterChief Financial Officer at The Oncology Institute00:23:51Sorry, mainly in terms of what? David LarsenManaging Director at BTIG00:23:53In terms of reimbursement for fee for service revenue and also Rob CarterChief Financial Officer at The Oncology Institute00:23:57Yes, that's correct. I mean hypothetically it would impact B and D. David LarsenManaging Director at BTIG00:24:03Okay. David LarsenManaging Director at BTIG00:24:05Okay. It looks like a pretty good quarter. Congrats on good start to the year. And thanks for taking my questions. I'll hop back in the queue. Rob CarterChief Financial Officer at The Oncology Institute00:24:15Thanks so much, David. We appreciate it. Operator00:24:20Thank you. And our next question comes from Yuan Zi with B. Riley Securities. Please proceed with your question. Yuan ZhiManaging Director at B.Riley Securities00:24:28Thank you for taking our questions. Dan, maybe we can start with the recent report by UnitedHealth. It was reported that the seniors within their Medicare Advantage plan used health care services twice as much as last year. I want to check if you noticed a similar trend within oncology practice, or is it related to some other diseases or surgery practice? Daniel VirnichChief Executive Officer at The Oncology Institute00:24:54Yeah, I can't speak to what other drivers might be associated with that. What I can say is that we track that on a very close basis for the oncology care needs of the populations we serve. And, you know, we haven't seen a jump to the magnitude that United mentioned. I don't know if that's driven by other drugs outside of oncology or other utilization trends, have been more unfavorable than expected. Yuan ZhiManaging Director at B.Riley Securities00:25:18Yep, maybe a follow-up question here. So they also reported the enrolled patients are sicker. I guess my question is two parts. First, did you notice similar trends there? And two, when you negotiate a value based contract with the payer, is it based on historical data from insurance companies or is it based on your own database and external service to reflect the latest patient profile? Daniel VirnichChief Executive Officer at The Oncology Institute00:25:48Yeah, so for the first part of the question, we haven't noticed a change in prevalence or average stage of cancer patients we're treating. So, that would correlate to a sicker population that hasn't pivoted that we've noticed. In terms of pricing, we do that based off of historical utilization up through the most recent period before we make a contract go effective. So, we have a pretty recent trend on utilization. And then we factor in a cost trend related to historical drug price changes as well in our forward looking utilization. Daniel VirnichChief Executive Officer at The Oncology Institute00:26:23So, that's pretty real time as far as how contributing to the pricing of our contracts. Yuan ZhiManaging Director at B.Riley Securities00:26:30Yep. Got it. So on your new territory part, is there any metrics you can share on the progress to fill up the capacities in your Florida clinic, whether it is the lives under management in terms of overall capacity or patient encounter? Daniel VirnichChief Executive Officer at The Oncology Institute00:26:50I'm so sorry, Yuan, could you please repeat the first part of the question? Yuan ZhiManaging Director at B.Riley Securities00:26:53Yeah, is there any metrics you can share on the progress to fill up capacities in your Florida clinic? Daniel VirnichChief Executive Officer at The Oncology Institute00:27:02Yeah, absolutely. So we track, we project encounters by market and by down to the detail by clinic across our portfolio as we forecast each year. And we are tracking our right to plan in terms of capacity fill in both our legacy markets and then the newer markets like Florida. There is some additional upside we believe in the back half of this year related to some contract wins, which are in the pipeline, but not in the forecast. So, all is going to plan as far as slowing capacity. Yuan ZhiManaging Director at B.Riley Securities00:27:32Yep. Got it. And maybe one last question from me. Just to clarify, do you aim to have a cash flow positivity and profitability in the second half of twenty twenty five versus 4Q twenty twenty five from your last earnings call? And was there any change there? Rob CarterChief Financial Officer at The Oncology Institute00:27:52No change to guide. We expect full cash flow and adjusted EBITDA positivity in Q4 of twenty twenty five. Yuan ZhiManaging Director at B.Riley Securities00:28:00Got it. Thank you. Rob CarterChief Financial Officer at The Oncology Institute00:28:02Thanks, Juan. Operator00:28:06Thank you. Our next question comes from the line of Bill Sutherland with The Benchmark Company. Please proceed with your question. Bill SutherlandDirector of Research at The Benchmark Company LLC00:28:23Thanks, operator. Hey, guys. Thanks for taking the questions. Most of mine have been asked. But going back to a couple of the key business metrics, the slight decline in the lives under value based contracts, is that related to that contract you were talking about that went away last year? Daniel VirnichChief Executive Officer at The Oncology Institute00:28:48Yeah, exactly. As measured by lives, that is a decrease. But I would just keep in mind that there's a product mix in every contract, and that specific contract had a heavy predominance of Medi Cal and commercial lives, which are high numbers but low PMPM reimbursement typically versus our newer markets where we're signing MA only contracts which are lower lives but higher reimbursement. Bill SutherlandDirector of Research at The Benchmark Company LLC00:29:12Got it. Any important renewals coming up as far as contracts? Daniel VirnichChief Executive Officer at The Oncology Institute00:29:21Nothing significant to mention, no. Most of our relationships are multi year, many of them date back over ten years. They typically auto renew and then, yeah, there's no significant renewals in the near future Bill SutherlandDirector of Research at The Benchmark Company LLC00:29:36then the guidance for the year, is there any pipeline conversion that you need to execute to do the numbers or is it basically all set up at this point? Rob CarterChief Financial Officer at The Oncology Institute00:29:49Yeah, we don't need any additional value based contracts that are in the pipeline to achieve guidance. So any additional wins that are in the pipeline would be upside to what we've guided to. Bill SutherlandDirector of Research at The Benchmark Company LLC00:30:01Okay. And finally, it's an interesting trend and I'm not sure if it's not really part of your model, but I keep hearing from health systems about trying to do more of the cancer cases in the home with everything else. How does that trend kind of segue with your business, if at all? Thanks. Daniel VirnichChief Executive Officer at The Oncology Institute00:30:27Yeah, I mean, think it would be a very positive trend for if more cancer care was delivered in the home. We work pretty closely with our pair partners and trying to find innovative ways to deliver therapeutics in the home. I'd say it's much easier on the specialty medication side than it is with infusible. But that being said, there's no reason why we can't achieve that as a future state. So again, that gets back to our mission to deliver higher level care in the community and something we would definitely want to be a part of. Bill SutherlandDirector of Research at The Benchmark Company LLC00:30:59Got it. Okay. Nice quarter. Thanks very much. Operator00:31:05Thanks, And our next question comes from Robert LeBoyer with Noble Capital Markets. Please proceed with your question. Robert LeboyerSenior Biotechnology Analyst at Noble Capital Markets00:31:18Thank you. Congratulations on a nice quarter. Question has to do with the number of lives under contract and covered by the managed care policies. The previous number was 1,900,000. It looks like 're adding a $100,000 in the first and second quarter and then another $80,000 in Nevada after July 1. Robert LeboyerSenior Biotechnology Analyst at Noble Capital Markets00:31:48So is that just simply additive to the 1.9 or is there some more nuanced way to project the number of lives that are covered? Rob CarterChief Financial Officer at The Oncology Institute00:32:05No, it's additive. That's the right way of thinking about it. The nuance in terms of modeling the financial impact would be where those lives are located. And so as we've talked about before in some of our material, there is a higher PMPM for contracts in Nevada and Florida than there is in California due to the overall cost of care. So that would be the one nuance to consider. Robert LeboyerSenior Biotechnology Analyst at Noble Capital Markets00:32:30Okay, great. And in terms of seasonality or any kind of other trends that you see throughout the year, you noticed anything in the first quarter versus other quarters throughout the year at this point? Rob CarterChief Financial Officer at The Oncology Institute00:32:49Yes. So our first quarter is always seasonally the lowest in terms of encounter volume. And so that's part of the whole picture when you're looking at the full year guide. We knew that it would be the lowest quarter in terms of revenue, the worst quarter in terms of adjusted EBITDA loss. And so we expect to see progressive improvement quarter over quarter, both due to seasonality as well as the addition of new contracts and lives and encounter growth. Robert LeboyerSenior Biotechnology Analyst at Noble Capital Markets00:33:18Okay, good. And just one last question. In terms of the top three plans and clients that you have, what would be the percentage of each of the top three in terms of revenues? Rob CarterChief Financial Officer at The Oncology Institute00:33:37As a percent of cap revenue, it's probably about 20%, if you're looking at the top three contracts. Robert LeboyerSenior Biotechnology Analyst at Noble Capital Markets00:33:45Okay, great. All right, thank you very much. Rob CarterChief Financial Officer at The Oncology Institute00:33:49Thank you. Daniel VirnichChief Executive Officer at The Oncology Institute00:33:49Thank you, Robert. Operator00:33:53Thank you. And as a reminder, this is your final chance to ask a question. If you would like to, please press star one on your telephone keypad. Okay. There are no further questions at this time. And with that, this does concludeRead moreParticipantsExecutivesMark HueppelsheuserGeneral CounselDaniel VirnichChief Executive OfficerRob CarterChief Financial OfficerAnalystsDavid LarsenManaging Director at BTIGYuan ZhiManaging Director at B.Riley SecuritiesBill SutherlandDirector of Research at The Benchmark Company LLCRobert LeboyerSenior Biotechnology Analyst at Noble Capital MarketsPowered by